According to MF daily, opposition MP proposed higher taxation of cigarettes as of January 2008, which should be discussed in budget committee and the Ministry of Finance support his proposal. The proposition is one among 90 amendatory ones to the government proposed tax reform. The higher taxation counts with higher minimal as well as specific+ad valorem excise tax. The minimal excise tax should increase from CZK 1.8/piece to CZK 1.83/piece and specific+ad valorem excise tax should increase as well from CZK 0.96/piece+28% of retail price however the daily didn’t stated exact figures. Nonetheless the change should impact low/medium/premium brands similarly.
The increase of excise tax above current plans could result in higher-than-required taxation from the EU. The excise tax is required to create at least 57% of the retail price and € 64/1,000 cigarettes. This step indicates that government could not stop increasing excise taxes in January 2008 but continue in the future above mentioned threshold. Although the change to current plan is rather minor and will result in increase in retail price by some CZK 5/pack in comparison to CZK 4/pack, this step could be seen negatively and could further lead to consumers’ migration to low-price/low-margin segment.